Fino Payments Bank Limited

Management Participants

  • Mr. Ketan Merchant – Interim Chief Executive Officer
  • Mr. Anup Agarwal – Interim Chief Financial Officer
  • Mr. Tejas Maniar – Chief Digital and Liabilities Officer
  • Moderator: Mr. Nikhar Arora – Go India Advisors LLP

Business Performance and Strategic Updates

Quarterly Context: Q1 FY27 described as "one of the toughest quarters in the history of bank" due to February 2026 event (unspecified) and pausing of profitable B2B UPI P2M business for recalibration. Expected relaunch of B2B business tentatively in Q4 FY27, dependent on ecosystem developments.

SFB Transition Progress:

  • Advancing well and on track to meet RBI stipulated conditions for transition to Small Finance Bank
  • Expect to complete all required milestones within prescribed 18-month timeline (from December 5, 2025)
  • Target to submit readiness to RBI by end of Q4 FY27 (by June 5, 2027)
  • Appointed PricewaterhouseCoopers to support implementation and operational readiness
  • Onboarded technology partners for loan origination system (LOS), loan management system (LMS) and other lending applications
  • Technology stack for end-to-end customer loan journey under development, expected ready by February 2027
  • Strengthening governance framework with required policies, operating procedures and compliance processes
  • Recruitment progressing well for key leadership positions; senior executives expected to join by end of calendar year 2026

Financial Performance Highlights:

  • EBITDA declined to INR 43.1 crores from INR 56 crores in Q4 FY26
  • Net revenue margin expanded to 42.8% (improved 275 bps sequentially and 925 bps YoY)
  • Fee-based income contributing over 75% of revenue stood at INR 234 crores in Q1 FY27
  • Cost of funds currently at 1.4%
  • Capital position remains comfortable above regulatory requirement for proposed SFB

Liability Franchise Performance:

  • Average CASA balance: INR 1,280 crores
  • Average total deposits increased 12% YoY to INR 2,772 crores
  • Renewal income grew 7% YoY to INR 67.5 crores
  • Customer acquisition: Added 8.4 lakh new accounts in quarter
  • Total account base: 1.83 crore accounts
  • Merchant network: Approximately 20 lakh merchants

Digital Engagement Metrics:

  • Digitally active customers: 64.6 lakhs (22% YoY growth)
  • Active FinoPay app customers: 8.4 lakhs (38% YoY growth)
  • UPI throughput: INR 60,000 crores (14% YoY growth)
  • 68% of newly acquired customers became UPI active within same quarter

Referral Lending Business:

  • Referral loan disbursements: INR 628 crores in Q1 FY27 (214% YoY growth)
  • Reached nearly 50% of total FY26 disbursals (INR 1,285 crores)
  • Focused on secured lending: gold loans, affordable housing, loan against property
  • Expected blended portfolio yield of 14% for future SFB lending
  • No non-compete clauses with partner NBFCs for future SFB lending to same customers

Technology Implementation:

  • Successfully implemented Finacle core banking platform in previous quarter
  • Q1 focus shifted to platform stabilization and Phase 2 capabilities for lending and new product development
  • Modular technology architecture and AI-enabled lending platforms provide scalable backbone for SFB

Operational Performance:

  • Total throughput declined 10% YoY due to strategic recalibration of UPI P2M B2B business and digital migration from cash
  • Throughput grew 3% sequentially
  • B2B CMS segment throughput grew 26% sequentially to INR 18,000 crores
  • B2B CMS revenue grew 5% sequentially despite pricing challenges
  • Traditional transaction business (remittance, micro ATM, AePS) saw 13% sequential revenue decline

Business Outlook and Guidance:

  • FY27 characterized as "year of consolidation" focusing on foundation building, people and technology investment
  • SFB transition expected to provide 300 bps funding advantage compared to other SFBs
  • Target NIMs of 8-9% for SFB operations
  • Target credit-deposit ratio of ~70% for initial SFB years
  • Target CASA ratio of ~65%
  • Business plan through FY30 remains unchanged: predominantly fee-based model complemented by secured lending portfolio
  • Expected to open 40 new branches in first year of SFB operations
  • SFB opex burden anticipated at ~INR 10 crores for FY27

Management Commentary on Structural Advantages:

Three enduring competitive strengths highlighted:

1. Strong liability franchise with structural cost of funds advantage (1.4%)

2. Predominantly secured and asset-light lending model powered by extensive network covering >95% of India's pin codes

3. Technology-led operational platform built around Finacle, AI-enabled lending capabilities and robust digital infrastructure

Q&A Session Key Points

MDR Provision Impact: Management confirmed qualitatively that proposed MDR provisions (for transactions >INR 2,000) would benefit Fino Payments Bank when implemented, particularly for B2B UPI P2M business relaunch.

Leadership Structure: CEO recruitment for SFB being handled by Board in consultation with RBI; current management holding positions interim. Credit function leadership hires expected September-October 2026.

BC Business Future: RBI regulation prohibits SFBs from conducting BC business for other banks. Various restructuring options being considered; concrete plan expected next quarter. No reverse merger planned - HoldCo and OpCo structure to remain unchanged.

Asset-Liability Management: Behavioral studies show >90% of liability book is stable savings account (SA) with small current account (CA) component. Book demonstrated stability during stress periods including March 2026 event and COVID.

Inorganic Growth: Current focus on organic growth; will evaluate acquisition opportunities if they arise to accelerate book building, but FY30 plan is primarily organic.